What’s the latest with SFUSD's budget deficit?
“District Fiscal Solvency Risk Level: High”
The California Fiscal Crisis & Management Assistance Team (FCMAT), after working with SFUSD for many months, recently published an updated assessment of SFUSD’s fiscal health. FCMAT has declared SFUSD’s solvency risk as “HIGH.” Here is a plain English translation of their Executive Summary:
SFUSD is at risk of being declared insolvent (and being taken over) by the state because:
SFUSD does a bad job of budgeting, and
SFUSD has almost no “rainy day” cash reserves in the bank
The California state superintendent of public instruction has been warning SFUSD about its fiscal problems since 2019, but SFUSD (under the previous Board of Education) ignored the warnings until the state declared SFUSD “no longer a going concern” and stepped in.
The biggest immediate concern is that SFUSD does not update its budget during the year to align its forecasts with actuals. Because SFUSD does not update its budget during the year, it can’t understand why its budgets don’t turn out as expected, it doesn’t track how it spends its money, and it only realizes too late how little cash it has left in the bank.
SFUSD also has problems with how it develops its budgets, and how it manages its cash.
Developing its budget: SFUSD only *estimates* its employee costs; it does not use *actual* employee costs in building its budget and deciding how to allocate employees per school site. This leads to problematic budget imbalances.
Managing cash: SFUSD only forecasts its cash needs for the current year, rather than following best practices and looking at least one year ahead. This leads to cash shortages which in turn leads to borrowing more money than it should.
SFUSD’s compensation costs take up a larger share of its budget than average, driven largely by its post-employment benefits. SFUSD also has a problematic practice of approving compensation increases before identifying and securing the funding to pay for those increases.
SFUSD is using one-time funds to pay for its high expenses, rather than making the hard choices necessary to make the required structural changes and saving up the one-time funds to build up its cash reserves.
It is the Board of Education’s job to make responsible budget decisions. It is management’s job to provide the data the Board needs to make and approve those budget decisions.
Produced by Families for San Francisco and SF Parent Coalition, local organizations committed to helping our public schools and students thrive and succeed.